מאמרים

Business Efficiency vs. Knowledgeable Consent

An Israeli court decided to disregard general conditions of sale referenced in the seller's invoice.

In order to save negotiating costs with respect to each simple sale, it is common practice to add in purchase orders and other documents reference to the business' general terms and conditions of sale or purchase (depending on which side of the transaction you are) and subjecting the transaction to such general terms.

However, in a dispute before the District Court in Tel-Aviv[1], the judge decided, in February of this year, that a stipulation regarding jurisdiction in general terms of sale referenced in an invoice, is not clear enough and therefore, disregarded it.

The seller (in the aforementioned judgment) included, in its invoices, reference to its general terms and conditions of sale, which included a stipulation regarding jurisdiction, under which the courts at the place of business of seller had exclusive jurisdiction with respect to disputes with the seller. The court concluded that the general terms and conditions of seller were not easy to find and access and that the seller had many subsidiaries and places of business worldwide, therefore, it was not clear which is the applicable place of business in which the courts would have jurisdiction.

Therefore, the court decided that under these circumstances the purchaser could not have knowledgeably consented to the stipulation with respect to jurisdiction, therefore, the court concluded that the jurisdiction should be determined in accordance with the international private law rules rather than the seller's general terms of sale.
The aforementioned judgement by the District Court in Tel-Aviv was based on a previous judgment by the Supreme Court of Israel[2] in which the Supreme Court decided that the referenced general terms of sale or purchase (as the case may be) must be clearly referenced in advance and must be easily obtained. The Supreme Court decided not to apply general terms and conditions which were not clearly referenced and in which a jurisdiction clause did not clearly apply a specific exclusive jurisdiction.

These decisions are in line with the decision by a court in England[3] regarding the “Battle of Forms”, who decided to disregard general terms and conditions of both seller and purchaser as it was not clear which of these general terms the parties agreed to apply. The court then changed a long time perception that the last general terms referenced are the binding terms.

Amongst the reasons for the vast use of reference in purchase orders to general terms and conditions of sale or purchase (as the case may be) is the efficiency in negotiating simple low price transactions without subjecting the business to liability, which the business may be subject to under applicable law. For example, the UN Convention on the International Sale of Goods provides to the damaged party compensation for all damages, which can be reasonably expected in advance by the other party including loss of profit[4]. Thus, the limitation of liability of the parties is not clear making risk management problematic (to say the least). Therefore, general terms of sale would usually include a clearer limitation while general terms of purchase would not. Therefore, a seller who is not careful enough to clearly disagree to apply the general terms and conditions of purchase of the purchaser may find itself bearing liability, which materially exceeds the value of the transaction.

This article is only an overview and is not in any way, a legal opinon.

[1] Civil Case 543-07-15 Tadbik Ltd. v. Avery Dennison BV et al (13.2.17)
[2] Approval of Civil Appeal 6574/12 Summit Fund Investment Management Ltd. v. Elinor Ben Yaacov (7.3.13), in Section 17.
[3] GHSP incorporated v. AV Electronics Ltd., High Court of England and Wales, Queen's Bench Division - CASE NO. 2008 Folio 1353.
[4] Article 74.